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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)



|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------------

For the transition period from  to

Commission
file number 000-28739

Satellite Security Corporation

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Nevada                                                         |  | 91-1903590                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

6779 Mesa Ridge Road, Suite 100

San Diego, California 92121

(Address of principal executive offices,

including zip code)

(877) 437-4199

(Issuers telephone number)



---

(Former name, former address
and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    YES  þ    NO ̈

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    YES ̈NO  þ

On November 16, 2006, the registrant had outstanding 110,981,560 shares of Common Stock, which is the registrants only class of common equity.

Transitional Small Business Disclosure Format (Check One)    YES ̈NO  þ



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##### Table of Contents

TABLE OF CONTENTS



|        |  |                                                             |  |   
|------- |  | ----------------------------------------------------------- |  | --
|        |  |                                                            
|        |  | Part I  Financial Information                              |  |   
|        |  |                                                            
|Item 1. |  | Financial Statements (unaudited)                            |  | 3 
|        |  |                                                            
|Item 2. |  | Managements Discussion and Analysis or Plan of Operations  |  | 14
|        |  |                                                            
|Item 3. |  | Controls and Procedures                                     |  | 26
|        |  |                                                            
|        |  | Part II  Other Information                                 |  |   
|        |  |                                                            
|Item 1. |  | Legal Proceedings                                           |  | 27
|        |  |                                                            
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 27
|        |  |                                                            
|Item 3. |  | Defaults Upon Senior Securities                             |  | 28
|        |  |                                                            
|Item 4. |  | Submission of Matters to a Vote of Security Holders         |  | 28
|        |  |                                                            
|Item 5. |  | Other Information                                           |  | 28
|        |  |                                                            
|Item 6. |  | Exhibits and Reports on Form 8-K                            |  | 28



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##### Table of Contents

PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Satellite Security
Corporation and Subsidiary

Consolidated Balance Sheet

(Unaudited)



|                                                                                                            |  |                   |             |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | -
|                                                                                                            |  | September 30,2006 |            
|Assets                                                                                                      |  |                   |             |  
|Current Assets                                                                                              |  |                   |             |  
|Cash and cash equivalents                                                                                   |  | $                 | 960,438     |  
|Accounts receivable, net of allowance for doubtful accounts of $215,000                                     |  |                   | 63,145      |  
|Inventories, net of allowance for obsolete inventory of $45,000                                             |  |                   | 309,819     |  
|Debt issuance costs                                                                                         |  |                   | 116,560     |  
|Deferred costs                                                                                              |  |                   | 22,992      |  
|Other current assets                                                                                        |  |                   | 14,892      |  
|                                                                                                            |  |                   |             |  
|Total Current Assets                                                                                        |  |                   | 1,487,846   |  
|                                                                                                            |  |                   |             |  
|Property and Equipment, Net                                                                                 |  |                   | 131,674     |  
|                                                                                                            |  |                   |             |  
|Other Assets                                                                                                |  |                   |             |  
|Debt issuance costs, net of current portion                                                                 |  |                   | 208,212     |  
|Deferred costs, net of current portion                                                                      |  |                   | 103,982     |  
|Restricted cash for letter of credit                                                                        |  |                   | 75,000      |  
|                                                                                                            |  |                   |             |  
|Total Other Assets                                                                                          |  |                   | 387,194     |  
|                                                                                                            |  |                   |             |  
|Total Assets                                                                                                |  | $                 | 2,006,714   |  
|                                                                                                            |  |                   |             |  
|Liabilities and Shareholders Deficit                                                                       |  |                   |             |  
|Current Liabilities                                                                                         |  |                   |             |  
|Accounts payable                                                                                            |  | $                 | 614,494     |  
|Accrued expenses                                                                                            |  |                   | 395,327     |  
|Deferred revenue, current portion                                                                           |  |                   | 73,718      |  
|Short-term debt                                                                                             |  |                   | 21,114      |  
|Notes and loans payable to related parties                                                                  |  |                   | 164,841     |  
|                                                                                                            |  |                   |             |  
|Total Current Liabilities                                                                                   |  |                   | 1,269,494   |  
|                                                                                                            |  |                   |             |  
|Non-Current Liabilities                                                                                     |  |                   |             |  
|Secured convertible notes, net of discount of $3,061,918                                                    |  |                   | 238,082     |  
|Embedded derivative                                                                                         |  |                   | 3,259,600   |  
|Common stock warrants                                                                                       |  |                   | 2,014,670   |  
|Long-term debt                                                                                              |  |                   | 8,882       |  
|Long-term debt payable to related parties, net of current portion                                           |  |                   | 768,200     |  
|Deferred revenue, net of current portion                                                                    |  |                   | 393,797     |  
|                                                                                                            |  |                   |             |  
|Total Non-Current Liabilities                                                                               |  |                   | 6,683,231   |  
|                                                                                                            |  |                   |             |  
|Total Liabilities                                                                                           |  |                   | 7,952,725   |  
|                                                                                                            |  |                   |             |  
|Commitments and Contingencies                                                                               |  |                   |             |  
|Shareholders Deficit                                                                                       |  |                   |             |  
|Common stock, $0.001 par value; authorized - 250,000,000 shares Issued and outstanding - 110,981,560 shares |  |                   | 110,982     |  
|Preferred stock, $0.001 par value; authorized - 10,000,000 shares Issued and outstanding - 0 shares         |  |                   |            |  
|Additional paid-in capital                                                                                  |  |                   | 6,877,832   |  
|Accumulated deficit                                                                                         |  |                   | (12,934,825 | )
|                                                                                                            |  |                   |             |  
|Total Shareholders Deficit                                                                                 |  |                   | (5,946,011  | )
|                                                                                                            |  |                   |             |  
|Total Liabilities and Shareholders Deficit                                                                 |  | $                 | 2,006,714   |  
|                                                                                                            |  |                   |             |  

The accompanying notes are an integral part of these consolidated financial statements.



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Satellite Security Corporation and Subsidiary

Consolidated Statements of Operations

(Unaudited)



|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | --------------------------------------- | ----------- | - | -------------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                                                                                    |  | For the three months endedSeptember 30, |             |   | For the nine months endedSeptember 30, |  
|                                                                                    |  | 2006                                    |             |   | 2005                                   |   |            | 2006 |  |   | 2005        |  
|Revenues                                                                            |  | $                                       | 419,632     |   |                                        | $ | 263,431    |      |  | $ | 1,074,929   |   |  | $ | 972,227    |  
|Cost of Revenues                                                                    |  |                                         | 355,764     |   |                                        |   | 186,132    |      |  |   | 917,356     |   |  |   | 553,081    |  
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Gross Profit                                                                        |  |                                         | 63,868      |   |                                        |   | 77,299     |      |  |   | 157,573     |   |  |   | 419,146    |  
|Operating Expense                                                                   |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Research and development                                                            |  |                                         | 67,863      |   |                                        |   | 82,077     |      |  |   | 205,030     |   |  |   | 235,350    |  
|Marketing and sales                                                                 |  |                                         | 196,375     |   |                                        |   | 121,572    |      |  |   | 485,320     |   |  |   | 269,941    |  
|General and administrative                                                          |  |                                         | 830,799     |   |                                        |   | 230,141    |      |  |   | 2,299,787   |   |  |   | 853,186    |  
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Total Expenses                                                                      |  |                                         | 1,095,037   |   |                                        |   | 433,790    |      |  |   | 2,990,137   |   |  |   | 1,358,477  |  
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Operating Loss                                                                      |  |                                         | (1,031,169  | ) |                                        |   | (356,491   | )    |  |   | (2,832,564  | ) |  |   | (939,331   | )
|Other Income/(Expense)                                                              |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Interest expense                                                                    |  |                                         | (3,127,590  | ) |                                        |   | (17,214    | )    |  |   | (3,993,958  | ) |  |   | (64,886    | )
|Net change in fair value of common stock warrants and embedded derivative liability |  |                                         | 722,097     |   |                                        |   |           |      |  |   | 722,097     |   |  |   |           |  
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Total Other Income/(Expense)                                                        |  |                                         | (2,405,493  | ) |                                        |   | (17,214    | )    |  |   | (3,271,861  | ) |  |   | (64,886    | )
|Net Loss                                                                            |  | $                                       | (3,436,662  | ) |                                        | $ | (373,705   | )    |  | $ | (6,104,425  | ) |  | $ | (1,004,217 | )
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted loss per share                                                    |  | $                                       | (0.03       | ) |                                        | $ | (0.01      | )    |  | $ | (0.06       | ) |  | $ | (0.02      | )
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  
|Weighted average common shares                                                      |  |                                         | 109,075,132 |   |                                        |   | 52,543,264 |      |  |   | 102,031,319 |   |  |   | 49,936,145 |  
|                                                                                    |  |                                         |             |   |                                        |   |            |      |  |   |             |   |  |   |            |  

The accompanying notes are an integral part of these consolidated financial statements.



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Satellite Security Corporation and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                   |  |                                         |            |   |      |   |            |  
|---------------------------------------------------------------------------------- |  | --------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                   |  | For the nine months ended September 30, |           
|                                                                                   |  | 2006                                    |            |   | 2005 |  
|Cash flows from operating activities:                                              |  |                                         |            |   |      |   |            |  
|Net loss                                                                           |  | $                                       | (6,104,425 | ) |      | $ | (1,004,217 | )
|Adjustments to reconcile net loss to net cash used in operating activities:        |  |                                         |            |   |      |   |            |  
|Non-cash interest expense on long-term debt                                        |  |                                         | 2,696,367  |   |      |   |           |  
|Non-cash interest expense on beneficial conversion feature on related party loan   |  |                                         | 799,614    |   |      |   |           |  
|Non-cash income from change in value of warrants and embedded derivative liability |  |                                         | (722,097   | ) |      |   |            |  
|Common stock issued for services                                                   |  |                                         | 446,000    |   |      |   |           |  
|Amortization of debt discount                                                      |  |                                         | 238,082    |   |      |   |           |  
|Share-based compensation expense                                                   |  |                                         | 157,802    |   |      |   |           |  
|Amortization of defered financing costs                                            |  |                                         | 65,228     |   |      |   |           |  
|Depreciation                                                                       |  |                                         | 34,759     |   |      |   | 32,757     |  
|Other non-cash items                                                               |  |                                         | 2,443      |   |      |   |           |  
|Changes in operating assets and liabilities:                                       |  |                                         |            |   |      |   |            |  
|Accounts receivable, net                                                           |  |                                         | 38,391     |   |      |   | 167,595    |  
|Inventories                                                                        |  |                                         | (276,119   | ) |      |   | 5,724      |  
|Deferred costs                                                                     |  |                                         | (73,675    | ) |      |   |            |  
|Accounts payable                                                                   |  |                                         | 116,612    |   |      |   | (352,603   | )
|Accrued liabilities                                                                |  |                                         | (87,377    | ) |      |   | (171,227   | )
|Deferred revenues                                                                  |  |                                         | 37,418     |   |      |   | 285,141    |  
|Other                                                                              |  |                                         | (7,875     | ) |      |   | 30,462     |  
|                                                                                   |  |                                         |            |   |      |   |            |  
|Net cash used in operating activities                                              |  | $                                       | (2,638,852 | ) |      | $ | (1,006,368 | )
|                                                                                   |  |                                         |            |   |      |   |            |  
|Cash flows from investing activities:                                              |  |                                         |            |   |      |   |            |  
|Purchases of property and equipment                                                |  |                                         | (62,219    | ) |      |   | (39,633    | )
|                                                                                   |  |                                         |            |   |      |   |            |  
|Net cash (used in) investing activities                                            |  | $                                       | (62,219    | ) |      | $ | (39,633    | )
|                                                                                   |  |                                         |            |   |      |   |            |  
|Cash flows from financing activities:                                              |  |                                         |            |   |      |   |            |  
|Proceeds from secured convertible notes                                            |  |                                         | 3,300,000  |   |      |   |           |  
|Deferred financing costs on secured convertible notes                              |  |                                         | (350,000   | ) |      |   |            |  
|Repayment of long-term debt                                                        |  |                                         | (14,481    | ) |      |   | (15,037    | )
|Proceeds from short-term loan                                                      |  |                                         | 500,000    |   |      |   | 1,009,912  |  
|Repayment of short-term loan                                                       |  |                                         | (540,000   | ) |      |   | (93,465    | )
|Proceeds from related party loan                                                   |  |                                         | 1,244,078  |   |      |   |           |  
|Repayment of related party loan                                                    |  |                                         | (351,051   | ) |      |   |           |  
|Shareholder advances                                                               |  |                                         | 105,000    |   |      |   | 259,918    |  
|Shareholder repayments                                                             |  |                                         | (248,479   | ) |      |   | (275,599   | )
|Proceeds from sale of stock                                                        |  |                                         |           |   |      |   | 150,016    |  
|                                                                                   |  |                                         |            |   |      |   |            |  
|Net cash provided by financing activities                                          |  | $                                       | 3,645,067  |   |      | $ | 1,035,745  |  
|                                                                                   |  |                                         |            |   |      |   |            |  
|Net increase in cash                                                               |  |                                         | 943,996    |   |      |   | (10,256    | )
|                                                                                   |  |                                         |            |   |      |   |            |  
|Cash at beginning of period                                                        |  |                                         | 16,442     |   |      |   | 2,239      |  
|                                                                                   |  |                                         |            |   |      |   |            |  
|Cash at end of period                                                              |  | $                                       | 960,438    |   |      | $ | (8,017     | )
|                                                                                   |  |                                         |            |   |      |   |            |  
|Supplemental disclosure of cash flow information:                                  |  |                                         |            |   |      |   |            |  
|Cash paid during the period for interest                                           |  |                                         | 133,826    |   |      |   | 64,886     |  
|                                                                                   |  |                                         |            |   |      |   |            |  
|Supplemental schedule of non-cash financing activities:                            |  |                                         |            |   |      |   |            |  
|Conversion of related party debt into common stock                                 |  |                                         | 1,131,200  |   |      |   | 802,217    |  
|Debt discount in connection with recording value of embedded derivative liability  |  |                                         | 3,300,000  |   |      |   |           |  
|Allocation of convertible note proceeds to warrants                                |  |                                         | 2,944,590  |   |      |   |           |  
|                                                                                   |  |                                         |            |   |      |   |            |  

The accompanying notes are an integral part of these consolidated financial statements.



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SATELLITE SECURITY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Basis of
Presentation

The Company

The
Company was incorporated under the laws of the State of Nevada on April 8, 1998 under the name Celtron International, Inc. (Celtron). On December 9, 2005, Celtron and Satellite Security Systems, Inc., a California
corporation (Satellite) entered into an Agreement and Plan of Merger (the Merger Agreement). On December 31, 2005, Satellite merged with and into a wholly owned subsidiary of Celtron (the Merger). Pursuant to
the terms of the Merger Agreement, Celtron issued one share of its common stock in exchange for each 3.12 shares of Satellites outstanding common stock resulting in the issuance of 65,076,750 shares of common stock to the former stockholders
of Satellite. Holders of 32,979,813 outstanding shares of Celtrons common stock continued to hold their stock following the Merger and there were no monetary assets exchanged to these holders.

On May 23, 2006, the Company changed its name to Satellite Security Corporation (referred to in this report as we or the
Company). The Company is authorized to issue a total of 250,000,000 shares of common stock with a par value of $0.001. In addition the Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001.

The Company currently has one operating subsidiary, Satellite, which is primarily engaged in the development and sale of asset tracking
and monitoring solutions and services.

Basis of Presentation

The accompanying consolidated financial statements as of September 30, 2006 and for the three and nine months ended September 30, 2006 and 2005, respectively, are unaudited. The consolidated financial
statements and related notes have been prepared in accordance with generally accepted accounting principles applicable to interim periods. In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. Certain prior year amounts have been reclassified to conform to current period
presentation.

The information contained in the following Condensed Notes to the Consolidated Financial Statements is condensed from that
which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements should be reviewed in conjunction with the consolidated financial statements and related notes thereto contained in the
Companys Annual Report on Form 10-KSB for the year ended December 31, 2005. It should be understood that the accounting measurements at an interim date inherently involve greater reliance on estimates than at year-end. The results of
operations for interim periods presented are not necessarily indicative of operating results for the entire year.

In accordance with
generally accepted accounting principles, the Merger was treated as a public shell merger purchase for financial reporting purposes. In accordance with the provisions of Statement of Financial Accounting Standards No. 141, Business
Combinations, Satellite was considered the acquiring enterprise for financial reporting purposes. Accordingly, the financial statements include the historical results of operations of Satellite, the accounting acquirer, except for the
statements of changes in shareholders deficit, which has been converted to shares of the Company based on the above merger ratios.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant
losses to date from operations, and for the nine months ended September 30, 2006. This factor, among others, including continuing negative cash flows from operations, negative working capital and shareholder deficiencies indicate that the
Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability of assets, the amounts of liabilities, and their classifications that might
be necessary should the Company be unable to continue as a going concern. The Companys continuation as a going concern is dependent on its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to
attain profitability.



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Management funded its operations for the first nine months of fiscal year 2006 through borrowings under a
$2,000,000 credit facility from a related party, The Aston Organization, Ltd (see Note 6 of the Notes to Consolidated Financial Statements), borrowings under a $540,000 Secured Note Agreement (see Note 4 of the Notes to Consolidated Financial
Statements) with an unrelated third party investor, as well as through a financing transaction with a group of unrelated accredited investors in which the Company issued an aggregate of (i) $3.3 million of secured, convertible promissory notes;
(ii) 21,607,465 Series A Warrants exercisable at $0.13 per share; and (iii) 18,006,221 Series B Warrants exercisable at $0.143 per share (see Note 4 of the Notes to Consolidated Financial Statements). The financing resulted in net proceeds
to the Company of $2,947,550 after deducting finders fees and expenses. In connection with this financing transaction all the outstanding principal, accrued and unpaid interest under the $2,000,000 credit facility was converted into common
stock and the associated note was terminated. Additionally, the Company repaid all amounts due under the $540,000 Secured Note Agreement by repaying $40,000 in cash and converting the remaining $500,000 into a subscription in the July 13, 2006
financing transaction of convertible notes and warrants.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated
financial statements are prepared using accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiary, Satellite. All significant intercompany balances and
transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Significant estimates made by management include revenue recognition estimates, the viability of recognizing deferred tax assets, valuation of equity instruments, and the allowance for doubtful accounts. Significant changes in
these estimates may have a material impact on the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents is comprised of cash and highly liquid time deposits held at a major financial institution, which from time to time exceed
federally insured limits. The Company believes that the risk of any loss related to its deposits is minimal.

Inventories

Inventories, which consist primarily of purchased parts and supplies, are stated at the lower of cost or market. Cost is determined by the first-in,
first-out (FIFO) method.

Warranty

The
Companys hardware is sold with a warranty against defects in material and workmanship for a period of one year from the date of sale. Hardware manufactured by third parties is typically covered by a one year warranty from the product
manufacturer. Anticipated future warranty costs are estimated, based upon historical expenses and an analysis of product field failures. At this time, the Company believes, based on historical data collected over the last 21 months, that the current
warranty reserve is sufficient to cover the associated costs of repairing or replacing defective hardware remaining under warranty.

Property and
Equipment

Property and equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of the
assets, generally ranging from three to five years. Expenditures for ordinary repairs and maintenance are expensed as incurred while major additions and improvements are capitalized.



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Revenue Recognition

The Companys revenues are derived from two sources, the sale of hardware that uses Global Positioning System (GPS) and ReFLEX paging technology, and the provisioning of asset tracking and related
monitoring services. Revenue related to the sale of hardware products is recognized upon delivery if no significant vendor obligations remain, the price is fixed or determinable and collection is reasonably assured. Monthly billings for services are
presented in advance of rendering the related services. Deferred revenue consists of advanced payments of these billings and are recognized as revenues in the month that the services are rendered.

Fair Value of Financial Instruments

The Company
estimates the fair value of certain of its assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures About Fair Value of Financial Instruments. At September 30, 2006, management
believes that the carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate their fair value because of the short maturity of these financial instruments. The Company believes that the carrying value of its
loans approximate their fair values based on current market rates of interest, except related party debt. Management believes it is impracticable to determine the fair value of related party debt because of the related party attributes of that debt.

Derivatives

Under Emerging Issues
Task Force (EITF) Issue No. 00-19,Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock, the initial balance sheet classification of contracts that require net cash settlement
are recorded as assets or liabilities and contracts that require settlement in shares are recorded as equity instruments. At each balance sheet date, the Company reviews contracts and equity instruments that are to be settled in common stock to
determine if sufficient common shares are available to satisfy the maximum number of shares that could be required to net-share settle the contracts, among other conditions. Changes in fair value are accounted for in the statement of operations
(See Note 4).

Concentration of Credit Risk

The Company provides products and services to customers in a variety of industries worldwide, including local and federal governments, utilities, and transportation. Concentration of credit risk with respect to trade receivables is limited
due to the geographic and industry dispersion of the Companys customer base. No one customer accounted for more than 9% of trade accounts receivable, net, at September 30, 2006.

A small number of customers have traditionally accounted for a large percentage of the Companys revenues. These customers accounted for
approximately 75% and 61% of total revenues for the three months ended September 30, 2006 and 2005, and 57% and 47% for the nine months ended September 30, 2006 and 2005, respectively.

Share-Based Compensation

On April 19, 2006, the shareholders of the Company adopted the 2006
Equity Incentive Plan to provide stock awards to eligible employees, directors, and consultants of the Company and its affiliates. Shares reserved for issuance under the plan shall not exceed 20,000,000 shares. The 2006 Equity Incentive Plan is
administered by the Board of Directors or a committee designated by the Board. Available stock awards under the plan include (i) incentive stock options, (ii) non-statutory stock options, (iii) stock bonuses, and (iv) rights to
acquire restricted stock.

In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS No. 123, Share-Based
Payment, which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. On April 14, 2005, the U.S.
Securities and Exchange Commissions adopted a new rule amending the effective dates for SFAS No. 123(R). In accordance with the new rule, the accounting provisions of SFAS No. 123(R) were effective for the Company beginning in the quarter
ended March 31, 2006.

Under SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the estimated
fair value of the award, and is recognized as an expense over the employees requisite service period. The Company adopted the provisions of SFAS No. 123(R) effective January 1, 2006, using a modified prospective application, which
provides for certain changes to the method for valuing share-based compensation. Under the modified



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prospective application, prior periods are not revised for comparative purposes. The valuation provisions of SFAS No. 123(R) apply to new awards and to
awards that are outstanding at the effective date and subsequently modified, repurchased or cancelled. Estimated compensation expense for awards outstanding at the effective date will be recognized over the remaining service period using the
compensation cost calculated for pro-forma disclosure purposes under SFAS No. 123.

On November 10, 2005, the FASB issued FASB
Staff Position No. SFAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards. The Company has elected to adopt the alternative transition method provided in this FASB Staff Position for calculating
the tax effects of share-based compensation pursuant to SFAS No. 123(R). The alternative method includes a simplified method to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of
employee share-based compensation, which is available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123(R).

During the three months ended September 30, 2006, the Company granted employees incentive stock options to purchase up to 1,700,000 shares of its common stock at a price per share of $0.08 to $0.13 under the terms of the 2006 Equity
Incentive Plan. The options expire in 2016 and vest over a period of three years from the date of grant. Based on the current fair market value of the Companys common stock on dates of grant, total compensation expense of $129,324 will be
recognized under the Black-Scholes option pricing model in connection with the option grants over the three year vesting period.

Option
valuation models require the input of highly subjective assumptions, including the expected life of the option and stock price volatility. Because changes in the subjective input assumptions can materially affect the fair value estimate, in the
opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The adoption of SFAS No. 123(R)s fair value method may have a negative impact on the Companys results
of operations if the Company grants share-based payments to its employees in the future. The impact of adopting SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.
SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current accounting literature. The
requirement will reduce net operating cash flows and increase net financing cash flows in periods of adoption.

The following weighted
average assumptions were used for grants at September 30, 2006:



|                             |  |                                              |   |  |                                              |  
|---------------------------- |  | -------------------------------------------- | - |  | -------------------------------------------- | -
|                             |  | For the three monthsended
September 30, 2006 |   |  | For the nine months ended September 30, 2006 |  
|Expected option life (years) |  | 5                                            |   |  | 5                                            |  
|Risk-free interest rate      |  | 4.98                                         | % |  | 4.96                                         | %
|Expected dividend yield      |  | None                                         |   |  | None                                         |  
|Expected volatility          |  | 63.32                                        | % |  | 64.40                                        | %

The share-based compensation expense calculated using the Black-Scholes model for grants at
September 30, 2006 is as follows:



|                           |  |                                              |        |                                            |   |        
|-------------------------- |  | -------------------------------------------- | ------ | ------------------------------------------ | - | -------
|                           |  | For the three monthsended September 30, 2006 |        | For the nine monthsended September 30,2006
|Research and development   |  | $                                            | 11     |                                            | $ | 11     
|Marketing and sales        |  |                                              | 9,944  |                                            |   | 16,460 
|General and administrative |  |                                              | 41,107 |                                            |   | 87,922 
|                           |  |                                              |        |                                            |   |        
|Share-based compensation   |  | $                                            | 51,062 |                                            | $ | 104,393
|                           |  |                                              |        |                                            |   |        



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A summary of option activity as of September 30, 2006 is as follows:



|                                         |  |            |   |  |                               |       |                                                     |     
|---------------------------------------- |  | ---------- | - |  | ----------------------------- | ----- | --------------------------------------------------- | ----
|Options                                  |  | Shares     |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractualTerm (in years)
|Outstanding Options at December 31, 2005 |  | 1,923,077  |   |  | $                             | 0.31  |                                                     |    
|Granted                                  |  | 9,123,077  |   |  | $                             | 0.127 |                                                     | 9.66
|Exercised                                |  |           |   |  |                               |      |                                                     |    
|Forfeited, cancelled or expired          |  | (1,923,077 | ) |  | $                             | 0.31  |                                                     |    
|                                         |  |            |   |  |                               |       |                                                     |     
|Outstanding at September 30, 2006        |  | 9,123,077  |   |  | $                             | 0.127 |                                                     | 9.66
|                                         |  |            |   |  |                               |       |                                                     |     
|Exercisable at September 30, 2006        |  | 1,923,077  |   |  | $                             | 0.15  |                                                     |    
|                                         |  |            |   |  |                               |       |                                                     |     

The weighted average grant-date fair values of options granted during the nine months ended
September 30, 2006 was $0.117 per share. There were no options exercised for the nine months ended September 30, 2006.

Issuance of Stock for
Non-cash Consideration

All issuances of the Companys common stock for non-cash consideration have been assigned a dollar amount
equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by consultants and others and has
been valued at the market value of the shares issued.

On July 7, 2006, the Board of Directors approved and issued 534,088 shares of
the Companys common stock to all employees of the Company who had been employed since October of 2005 as a stock grant under the terms of the Companys 2006 Equity Incentive Plan. In connection with the transaction, the Company recorded
total compensation expense of $53,409 based on the closing price of its common stock on July 7, 2006, the award date.

On
July 21, 2006, the Board of Directors approved a stock grant under the terms of the 2006 Equity Incentive Plan and issued 1,900,000 shares of the Companys common stock to two consultants of the Company in exchange for past services
rendered. In connection with the transaction, the Company recorded total consulting expense of $266,000 based on the closing price of its common stock on July 21, 2006, the award date.

The Companys accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions
of EITF Issue No. 96-18, Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and EITF Issue No. 00-18, Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the
consultant or vendor is reached or (ii) the date at which the consultant or vendors performance is complete.

Basic and Diluted Net Loss Per
Share

The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. SFAS No. 128
requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives effect to all instruments which could result in the issuance of potentially dilutive common shares outstanding during the period, if any, including stock options, using the
treasury stock method, and Convertible Notes, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or
warrants. The potential issuance of additional common stock has not been included in the computation of diluted loss per share, as the effect would be anti-dilutive.



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Note 3 - Property and Equipment

Property and equipment as of September 30, 2006 consists of the following:



|                               |  |   |          |  
|------------------------------ |  | - | -------- | -
|Furniture and equipment        |  | $ | 193,250  |  
|Purchased software costs       |  |   | 145,624  |  
|                               |  |   |          |  
|Total property and equipment   |  |   | 338,874  |  
|Less: Accumulated depreciation |  |   | (207,200 | )
|                               |  |   |          |  
|Net property and equipment     |  | $ | 131,674  |  
|                               |  |   |          |  

Depreciation expense was $11,827 and $11,253 for the three months ended September 30, 2006
and 2005, respectively. For the nine months ended September 30, 2006 and 2005, depreciation expense was $34,759 and $32,757, respectively.

Note 4
- Secured Convertible Notes, Embedded Derivative and Common Stock Warrants

On July 13, 2006 the Company entered into a secured
convertible note and warrant financing transaction (the Secured Note Financing) with a group of unrelated accredited investors in which the Company issued an aggregate of: (i) $3.3 million of Secured Convertible Promissory Notes
(the Notes); (ii) 18,006,221 Series A Warrants exercisable at $0.13 per share and; (iii) 18,006,221 Series B Warrants exercisable at $0.143 per share. The Series A and Series B warrants expire on July 13, 2011.

The Secured Note Financing resulted in net proceeds to the Company of $2,947,550 after deducting finders fees of $330,000 and other expenses of
$22,450. In connection with the Secured Note Financing, the Company also granted 3,601,244 Series A warrants at an exercise price of $0.13 per share to an investment banker as a finders fee. In addition, the Company will be required to pay
finders fees totaling 10% of the cash proceeds received by the Company upon exercise of any of the Series A or Series B Warrants. The Company will use the proceeds from the Secured Note Financing for general working capital purposes.

The transaction costs incurred in connection with the Secured Note Financing have been deferred and will be amortized using the interest
method over the three-year life of the Notes. Any transaction costs in connection with the future exercise of the warrants will be recognized at that date, when and if the warrants are exercised.

At the election of the holders of the Notes, any outstanding principal and interest due under the Notes may be converted into shares of the
Companys common stock at a conversion price equal to 75% of the volume weighted average price of the Companys common stock using the AQR function as reported by Bloomberg L.P. for the five trading days preceding the conversion date.
In addition, the Company has filed a registration statement with the Securities and Exchange Commission to register the resale of the shares of common stock underlying the Convertible Promissory Notes and the Series A and B Warrants in connection
with the Secured Note Financing.

The amounts outstanding under the Secured Convertible Promissory Notes bear interest at the rate of
10% per annum, payable on a quarterly basis. The Notes mature on July 13, 2009 and are secured by a lien on substantially all of the Companys assets, including a pledge of its shares in Satellite. Total interest paid in connection
with the Notes for the three and nine months ended September 30, 2006 was $71,425.

In accounting for the Notes and the Series A and
Series B Warrants described above, the Company considered the guidance contained in EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In, a Companys Own Common Stock, and SFAS
No. 133 Accounting for Derivative Instruments and Hedging Activities. In accordance with the guidance provided in EITF No. 00-19, the Company determined that the conversion feature of the Notes represents an embedded derivative since the
note is convertible into a variable number of shares upon conversion and a liquidated damage clause contained in the Registration Rights Agreement related to the Notes requires the Company to pay liquidated damages of 2.0% for each thirty
(30) days, or part thereof, of the outstanding principal amount of the Notes, in cash or registered shares of common stock to the Note Holders in the event that a registration statement covering the shares underlying the Notes and warrants was
not registered for sale and distribution under the 1933 Act within forty-five (45) calendar days after the closing date of July 13, 2006 and caused to be declared effective not later than ninety (90) calendar days after the closing
date or one hundred and fifty (150) calendar days in the event the registration statement is reviewed by the Securities and Exchange Commission. Accordingly, the Notes are not considered to be conventional convertible debt under
EITF No. 00-19 and thus the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability.



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The Company calculated the fair value of the embedded conversion feature on July 13, 2006 using the
Black-Scholes valuation model with the following assumptions: market price of $0.13; exercise price of $0.092, which represents a 25% discount to the Companys volume weighted average price as reported on the OTC Bulletin Board for the five
(5) day period prior to July 13, 2006; discount rate of 5.04%; expected volatility of 63% and an expected life of five (5) years. The fair value of $3,072,343 was recorded as a debt discount, which reduced the carrying amount of the
Notes. To determine the liability related to the warrants, the Company calculated the fair value of the warrants on July 13, 2006 using the Black-Scholes valuation model with the following assumptions: market price of $0.13; exercise price of
$0.13 and $0.143; discount rate of 5.04%; expected volatility of 63% and an expected life of five (5) years. The fair value of $2,924,024 was also recorded as a debt discount. Combined with deferred debt issuance costs, the total debt discount
attributable to the warrants and embedded conversion feature of $5,996,367 exceeded the principal amount of the Notes by $2,696,397. Accordingly this excess amount was charged directly to interest expense on July 13, 2006. The remaining
$3,300,000 of debt discount will be amortized over the three year term of the Notes. As of September 30, 2006, interest expense totaled $238,082 in connection with the amortization of this debt discount.

A summary of the Secured Convertible Promissory Notes at September 30, 2006 is as follows:



|                                                                   |  |   |          
|------------------------------------------------------------------ |  | - | ---------
|Secured Convertible Promissory Notes; 10% per annum; due 7/13/2009 |  | $ | 3,300,000
|Debt Discount, net of accumulated amortization of $238,082         |  |   | 3,061,918
|                                                                   |  |   |          
|Total                                                              |  | $ | 238,082  
|                                                                   |  |   |          

The Company is required to measure the fair value of the warrants and the embedded conversion
feature on the date of each reporting period. The effect of this re-measurement will be to adjust the carrying value of the liabilities related to the warrants and the embedded conversion feature. Accordingly, the Company re-measured the fair value
of the warrants at September 30, 2006 using the Black-Scholes valuation model with the following assumptions: market price of common stock on the measurement date of $0.10, exercise price of $0.13 and $0.143, discount rate of 4.67%, expected
volatility of 64.1%, and an expected life of five (5) years. This resulted in a fair market value in connection with the warrants of $2,014,670 at September 30, 2006. The decrease in fair market value of the warrants resulted in non-cash
interest income of $909,354.

The Company re-measured the fair value of the embedded conversion feature at September 30, 2006 using
the Black-Scholes valuation model with the following assumptions: market price of common stock on the measurement date of $0.10, exercise price of $0.068 which represents a 25% discount to the Companys volume weighted average price as reported
on the OTC Bulletin Board for the five (5) day period prior to the last trading day of the period, September 29, 2006; discount rate of 4.67%, expected volatility of 64.1% and an expected life of five (5) years. This resulted in a
fair market value for the embedded conversion feature of $3,259,600. The increase in the fair market value of the embedded conversion feature resulted in a non-cash interest expense of $187,257. Combined with non-cash interest income related to the
re-measurement of the fair value of the warrants, the Company recorded non-cash interest income of $722,097 in the quarter ended September 30, 2006 related to the net change in the fair market value of the common stock warrants and embedded
derivative liability.

In connection with the Secured Note Financing, the Company repaid all amounts due under the $540,000 Secured Note
Agreement with Double U Master Fund, L.P. by repaying $40,000 in cash and converting the remaining $500,000 into a subscription in the July 13, 2006 financing transaction of convertible notes and warrants. In connection with the repayment, the
Company re-priced the 540,000 warrants issued to Double U Master Fund, L.P. on May 19, 2006 from an exercise price of $0.25 per share to an exercise price of $0.13 per share, the market price on the date of the Secured Note Financing. Based on
the Black-Scholes model, the Company recorded interest expense of $20,566 in connection with the re-pricing. The exercise date of the 540,000 warrants and the registration rights remain unchanged.



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Note 5 - Debt

As of September 30, 2006, debt consisted of the following obligations:



|                                                                                                                                                                                         |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | -
|Note payablesoftware purchase, due by December 2007, payable in 48 monthly installments of $1,885, bearing interest at 9%, secured by
related software and guaranteed by a shareholder. |  | $ | 29,996  |  
|                                                                                                                                                                                         |  |   |         |  
|Less: short-term portion                                                                                                                                                                 |  |   | (21,114 | )
|                                                                                                                                                                                         |  |   |         |  
|Long-term debt                                                                                                                                                                           |  | $ | 8,882   |  
|                                                                                                                                                                                         |  |   |         |  

Note 6 - Related Party Transactions

Notes and Loans

As of September 30, 2006, the Company had notes and loans to related parties
consisting of the following:



|                                                                                                   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Note payable  officer  unsecured, 12% interest, due June 1, 2006                                 |  | $ | 20,000   |  
|Loans payable  shareholders  unsecured, non-interest bearing, no terms for repayment.            |  |   | 115,730  |  
|Loan payable  shareholder  unsecured, due in 228 installments of $7,000, imputed interest of 7%. |  |   | 797,311  |  
|                                                                                                   |  |   |          |  
|Total related party debt                                                                           |  |   | 933,041  |  
|Less: short-term portion of related-party debt                                                     |  |   | (164,841 | )
|                                                                                                   |  |   |          |  
|Total long-term portion of related party debt                                                      |  | $ | 768,200  |  
|                                                                                                   |  |   |          |  

On July 9, 2006 the Company reached an agreement on a loan payable to a shareholder to
accelerate repayment of this note. Under the agreement, the shareholder agreed to waive the requirement in the original note which entitled him to 15% of the proceeds of the July 13, 2006 Secured Note Financing transaction in exchange for
payment to the shareholder in the amount of $300,000 to be applied as follows: $230,000 to reimburse shareholder for payment shareholder made in full of a note with bank for which the Company is the guarantor on the underlying note with the bank in
the same amount, $10,000 for prior year rent and $60,000 on the loan payable to the shareholder. All penalties and claims for missed payments were waived and payments on the loan payable to the shareholder resumed in the amount of $7,000 per month
on August 15, 2006.

Interest

The
Company paid $14,809 and $10,294 in interest payments to a shareholder for the three months ended September 30, 2006 and September 30, 2005, respectively, and $35,178 and $13,046 for the nine months ended September 30 2006 and 2005,
respectively.

Aston Note

On
February 14, 2006, the Company entered into a $2,000,000 credit arrangement with The Aston Organization, Ltd. (Aston) and Zirk Engelbrecht, Chairman of the Board of Directors. Mr. Engelbrecht and Mr. Stephen Hallock, also
a member of the Board of Directors, were at the time the sole shareholders of Aston. Pursuant to the terms and conditions set forth in a Convertible Promissory Note (the Aston Note) between Aston and the Company, Aston agreed to make
loans to the Company from time to time, up to an aggregate amount of $2,000,000.

On July 9, 2006, the Company entered into a Note
Conversion and Lock-Up Agreement with Aston in which Aston elected to convert $1,035,200 being the total amount of outstanding principal, accrued and unpaid interest and all other amounts due under the Aston Note into 9,410,909 shares of the
Companys common stock at the rate of $0.11 per share, the market price on the date of the Note Conversion and Lock-Up Agreement. In connection with the conversion, the Company and Aston agreed to terminate the Aston Note.



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Employment Agreement

On July 14, 2006, the Company entered into an employment agreement with its Chief Financial Officer. The employment agreement is at-will and calls for annual base salary of $160,000, plus a certain bonus
provision if performance targets are met. In addition to a base salary, the Company also granted, pursuant to the terms of the 2006 Equity Incentive Plan, an incentive stock option to purchase 1,250,000 shares of its common stock at an exercise
price of $0.13 per share, which was the market price on the date of grant. The options vest over a three year period from the date of grant and expire on July 14, 2016.

Legal Fees

The Company paid legal fees to a law firm in which a relative of an officer, shareholder
and director of the Company is a shareholder. Total legal fees paid to this law firm for the three months ended September 30, 2006 and 2005 were $85,000 and $16,501 respectively. For the nine months ended September 30, 2006 and 2005, total
legal fees paid to this firm were $165,213 and $27,311 respectively.

Note 7 - Commitments and Contingencies

In the course of business, the Company has been, and may continue to be, involved in various claims seeking monetary damages and other relief. The amount
of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of the Companys management, the ultimate liability for any legal claims currently pending against the Company will not have a material adverse
affect on the Companys financial position, results of operations or cash flows. Insofar as current legal claims against the Company that have been filed or are currently ongoing, see Part II, Item 1 below.

Note 8 - Recent Accounting Pronouncements

In
February 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an Amendment of FASB Statements No. 133 and 140. FASB No. 155 eliminates the exemption
from applying FASB No. 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments, thus providing for simplified accounting for certain hybrid financial
instruments by permitting the fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. Under this approach, changes in fair value would be recognized by the Company

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value measurements. Where applicable, SFAS No. 157 simplifies and codifies related guidance within generally accepted accounting principles. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact this statement will have on its financial statements.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|------- | ---------------------------------------------------------

FORWARD LOOKING STATEMENTS

In addition to historical information, the following discussion of our results of operation
and financial condition contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. As contained herein, the
words expects, anticipates, believes, intends, will, and similar types of expressions identify forward-looking statements, which are based on information that is currently available to the
Company, speak only as of the date hereof, and are subject to certain risks and uncertainties. Please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated
by us in forward-looking statements. We have attempted to identify, in context, certain factors that we currently believe may cause actual future experiences and results to differ from our current expectations which are set forth below under the
heading Risk Factors. The difference may be caused by a variety of factors, including, but not limited to, the need for additional capital to execute the Companys business plan, the failure to develop significant demand for our
products and services, competition, including entry of new competitors, unexpected costs, lower revenues and net income than forecast, price increases for supplies, inability to raise prices, the risk of litigation and administrative



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proceedings involving us and our employees, higher than anticipated labor costs, the possible fluctuation and volatility of our operating results and
financial condition, adverse publicity and news coverage, inability to carry out marketing and sales plans, loss of key executives, changes in interest rates, inflationary factors, and other specific risks that may be alluded to in this report.

OVERVIEW

We entered into a Merger
Agreement with Satellite Security Systems, Inc. on December 9, 2005 pursuant to which Satellite was merged with and into a wholly owned subsidiary of the Company effective December 31, 2005, as discussed in further detail in Note 1 to the
Consolidated Financial Statements. In accordance with generally accepted accounting principles, the merger was accounted for as a public shell merger. Accordingly the financial statements included in this report contain the historical results of
operations of Satellite, except for the statements of changes in shareholders deficit, which has been converted to shares of the Company based on the above merger ratios.

Since the merger, our primary business has been the operations conducted by our subsidiary Satellite in the development and sale of asset tracking and
monitoring solutions and services. We generate one-time revenues through direct and channel sales of our GPS tracking devices which we market under the name GlobalGuard. We then offer and supply stealth and covert monitoring services with
two-way communications capabilities linked to our Monitoring and Support Center (the MSC) which we staff with trained personnel 24 hours a day, seven days a week. The monitoring services are provided under the terms of service contracts
which provide monthly recurring revenue to the Company. Typically these contracts have an initial period of one to five years. The amount of revenues derived from monitoring services is based on customer options for monitoring and control functions,
such as monitoring movement of vehicles in a fleet, remotely initiating operation of a generator, valve or other piece of equipment.

Our
products have the potential for broad-scale applications for law enforcement, homeland security, fleet tracking and management, utility applications and fixed point monitoring. We have initially focused our solutions on applications and services for
law enforcement, and we have several programs currently under way with Federal, state and local law enforcement agencies. These programs allow law enforcement officials to utilize our solutions to track suspects or convicted felons (e.g., sexual
predators) covertly. We also offer a Bait Car solution for law enforcement to deploy in aiding the fight against auto theft  a car with an integrated tracking device can be left unattended and we can notify law enforcement in the
event the vehicle moves.

We entered the third quarter with three operating objectives: secure additional working capital, recruit
personnel for key management positions, and increase our sales and distribution activities.

We entered the third quarter with limited cash
and a substantial working capital deficit. On July 13, 2006 we entered into a convertible note and warrant financing transaction (the Secured Note Financing) with a group of unrelated accredited investors in which the Company issued
an aggregate of: (i) $3.3 million of Secured Convertible Promissory Notes; (ii) 21,607,465 Series A Warrants exercisable at $0.13 per share; and (iii) 18,006,221 Series B Warrants exercisable at $0.143 per share. We received net
proceeds of $2,947,550 from the Secured Note Financing, after deducting finders fees and expenses. In connection with the Secured Note Financing we repaid two other outstanding loans. We used a portion of the proceeds from the Secured Note
Financing to pay off a short term $540,000 Promissory Note. In addition, as a condition to the financing, the Aston Organization, Ltd. agreed to convert $1,035,200 outstanding under a Secured Convertible Note into 9,410,909 shares of our common
stock at the rate of $0.11 per share, the market price on the date of the conversion. We will use the balance of the proceeds from the Secured Note Financing transaction for general working capital purposes.

On July 14, 2006 we entered into an Employment Agreement with Mr. Aidan Shields, pursuant to which Mr. Shields will act as our Chief
Financial Officer with oversight of all financial and reporting obligations for the company. On August 7, 2006 we entered into an employment agreement with Mr. Eric Chapman pursuant to which Mr. Chapman will act as President of our
operating subsidiary Satellite with responsibility for all of its operations, including sales and business development.

Our sales efforts
during the third quarter focused on the development of additional markets and distribution channels for our solutions. We targeted proposals and developed applications during the quarter that are tailored for Air Quality Management Districts and
school transportation and student safety, including monitoring the location of school buses in transit. Earlier this year, we entered into a Supply Agreement with Blue Bird Corporation, a



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manufacturer of school buses, to offer our GlobalGuard GPS solutions in their buses. Sales of hardware devices to Blue Bird Corporation accounted for a
substantial portion of our revenues for the period ended September 30, 2006. Overall revenues were $419,632 for the third quarter, bringing total revenues for the year to $1,074,929.

As we move into the fourth quarter we will look to continue the hardware sales and work with Blue Bird to market monitoring services to school districts
and school transportation customers. We are also looking to diversify our revenue base and increase overall revenues through the pursuit of opportunities with Air Quality Management Districts and vehicle fleet management companies where we believe
we offer unique solutions or customer value proposition. Despite these efforts, because of the small size of our operations and our dependence on a few customers or contracts opportunities, our business and results of operations may experience
volatility from quarter to quarter. If we fail to reach our operating goals, or if we incur unanticipated expenses, we may require additional capital to support our continued operations.

RESULTS OF OPERATIONS

Revenues

Revenues were $419,632 for the three months ended September 30, 2006, compared to $263,431 for the same period in 2005. Revenues were $1,074,929 for the nine months ended September 30, 2006 compared to
$972,227 for the same period in 2005. Revenues increased $156,201 or 59% for the three months ended September 30, 2006, compared to the same period in 2005. Revenues increased $102,702 or 11% for the nine months ended September 30, 2006,
compared the same period in 2005. The increases were primarily due to increased hardware sales partially offset by decreased monitoring service revenue from the Companys MSC.

Cost of Revenues

Cost of revenues includes hardware, wireless airtime expense and personnel-related
costs for the MSC. Costs of revenues were $355,764 or 85% of revenues for the three months ended September 30, 2006, compared to $186,132 or 71% of revenues for the same period in 2005. Costs of revenues were $917,356, or 85% of revenues for
the nine months ended September 30, 2006, compared to $553,081 or 57% of revenues for the same period in 2005. Cost of revenues increased $169,632, or 91%, for the three month period ended September 30, 2006 compared to the same period in
2005. For the nine month period ended September 30, 2006 cost of revenues increased $364,275, or 66%, compared to the same period in 2005. The increase in cost of revenues as a percentage of revenues is primarily attributable to product mix, as
a higher percentage of our revenues were derived from hardware sales during the period, combined with higher hardware costs from third party manufacturers, and reduced leverage on fixed costs at the MSC.

Research and Development

Research and development
expenses include payroll, and costs associated with software development, product design and outsourcing. Research and development expenses were $67,863 for the three months ended September 30, 2006, compared to $82,077 for the same period in
2005. Research and development expenses were $205,030 for the nine months ended September 30, 2006, as compared to $235,350 for the same period in 2005. Research and development decreased $14,214, or 17%, for the three months ended
September 30, 2006 compared to the same period a year ago. For the nine months ended September 30, 2006, research and development expenses decreased $30,320, or 13% compared to the same period in 2005. The decreases were primarily due to
reductions in research and development related payroll.

We expect to continue to invest in our ongoing research and development efforts of
integrating customer applications and introducing new hardware devices for sale. We believe that continued investment in research and development is a critical factor in maintaining our competitive position. However, our ability to maintain research
and development spending may be adversely impacted by our limited cash flow and liquidity.

Marketing and Sales Expenses

Marketing and sales expenses include payroll, and costs associated with advertising, promotions, trade shows, seminars, and similar programs, as well and
travel expenses. Marketing and sales expenses were $196,375 for the three months ended September 30, 2006, compared with $121,572 for the same period in 2005. Marketing and sales expenses were $485,320 for the nine months ended
September 30, 2006 compared to $269,941 for the same period in 2005. Marketing and sales expenses increased $74,803, or 62% for the three months ended September 30, 2006



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compared to the same period a year ago. For the nine months ended September 30, 2006, marketing and sales expenses increased $215,379 or 80% compared to
the same period in 2005. The increases were primarily due to additional payroll to support our channel sales programs.

We expect marketing
and sales expenses to increase in absolute dollar amounts and as a percentage of total revenues for the remainder of the year in connection with our marketing support to develop distribution channels for our products and services.

General and Administrative

General and
administrative expenses include payroll and costs associated with the finance, facilities, and legal and other administrative functions of the Company. General and administrative costs were $830,799 for the three months ended September 30, 2006
compared with $230,141 for the same period in 2005. General and administrative costs were $2,299,787 for the nine months ended September 30, 2006, compared with $853,186 for the same period in 2005. General and administrative expenses increased
$600,658 or 261%, for the three months ended September 30, 2006 compared to the same period a year ago. For the nine months ended September 30, 2006, general and administrative expenses increased $1,446,601, or 170% compared to the same
period in 2005. The increases in General and Administrative expenses were primarily due to increased audit, consulting and legal fees, partly as a result of our becoming a public company, as well as additional payroll to support the administrative
and finance functions.

We believe that our general and administrative expenses are adequate to support current needs and some growth.
However, given the size of our operations, small changes, such as the addition of a single payroll position, has a substantial impact on the general and administrative expenses.

Interest Expense

Interest expenses were $3,127,590 for the three months ended September 30,
2006 compared to $17,214 for the same period in 2005. Interest expenses were $3,993,958 for the nine months ended September 30, 2006, compared to $64,886 for the same period in 2005. The increase in interest expense for the nine months ended
September 30, 2006 was primarily due to the following:

Issuance of the convertible promissory note to the Aston Organization Ltd,
which included a beneficial conversion feature which, under generally accepted accounting principals, resulted in an interest expense of $799,614 for the nine months ended September 30, 2006.

Interest on the $3,300,000 of Notes issued with the $3,300,000 Convertible Debt and Warrant financing on July 13, 2006 at the rate of 10% per
annum and payable quarterly. Interest paid for the nine months ended September 30, 2006 was $71,425.

Non-cash expenses which we
incurred as a result of our valuation on July 13, 2006 of the initial warrant and embedded derivative liabilities related to the Notes and the revaluation of warrants associated with the Secured Note Agreement as of September 30, 2006. A
non-cash expense of $2,696,367 represents the amount that the aggregate of the warrant and embedded derivative liabilities exceeded the face amount of the convertible note of $3,300,000. Interest expense also includes the amortization of the debt
discount associated with the Notes. Interest expense on the amortization of the debt discount for the nine months ended September 30, 2006 was $238,082.

Net Change in Fair Value of Common Stock Warrants and Embedded Derivative Liability

Net change in fair value of common
stock warrants and embedded derivative liability of $722,097 consists of the net change in the carrying values of the liabilities for the common stock warrants and the embedded derivative liabilities related to the Secured Convertible Notes on
September 30, 2006.

Net Loss

Net
loss includes loss from operations and interest expense. We recorded a net loss of $3,436,662 for the three months ended September 30, 2006 compared to a net loss of $373,705 for the same period in 2005. We recorded a net loss of $6,104,425 for
the nine months ended September 30, 2006 compared to a net loss of $1,004,217 for the same period in 2005. The increase in net loss for the nine months ended September 30, 2006 as



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compared to the same period of 2005 was due to an increase in revenue of $102,702 offset by an increase in cost of revenues of $364,275; an increase in
operating costs of $1,631,660; increased interest expense of $3,929,072, primarily from the non-cash expenses which we incurred as a result of our valuation of the warrants and embedded derivative liabilities related to the Secured Note Financing
and the beneficial conversion feature on the Aston Note; and the net change in fair value of $722,097 on common stock warrants and embedded derivative related to the Notes issued on July 13, 2006 in connection with the Secured Note Financing
and revalued on September 30, 2006.

Liquidity and Capital Resources

On September 30, 2006, we had cash of $960,438 and accounts receivable, net of allowance for doubtful accounts, of $63,145. Our working capital as of
September 30, 2006 was $218,352 compared to a deficit of $1,248,299 at December 31, 2005.

Net cash used in operating activities
during the nine months ended September 30, 2006 was $2,638,852. The primary use of cash from operating activities was the net loss of $6,104,425, non-cash income of $722,097 from the change in value of warrants and embedded derivative
liability, and an increase of $276,119 in inventory. The primary sources of cash from operating activities was the non-cash interest expense of $2,696,367 which represents the amount that the aggregate of the warrant and embedded derivative
liabilities exceeded the $3,300,000 face amount of the Notes, non-cash interest expense of $799,614 in connection with a beneficial conversion feature on the Aston Note, common stock issued for services in the amount of $446,000, and non-cash
amortization of debt discount of $238,082.

Net cash used by investing activities during the nine month period ended September 30,
2006 was $62,219 and was due to purchases of property and equipment. There are no significant capital expenditures planned by the Company within the foreseeable future.

Since our inception, we have financed our cash needs primarily through financing activities. Net cash provided by financing activities for the nine months ended September 30, 2006 was $3,645,067, primarily from
the issuance of debt in three significant financing transactions:

On February 16, 2006 we entered into a Convertible Promissory Note
(the Aston Note) with The Aston Organization Ltd (Aston). Aston is a significant shareholder of the Company and is controlled by Zirk Engelbrecht and Steven Hallock, each of whom are directors of the Company. Under the terms
of the Aston Note, the Company had the right to request advances from Aston from time to time up to an aggregate of $2,000,000. Borrowings under the Aston Note were due and payable on December 31, 2006. On July 9, 2006 we entered into a
Note Conversion and Lock-Up Agreement with Aston in which Aston agreed to convert the $1,035,200 of outstanding principal, accrued and unpaid interest and all other amounts due under the Aston Note into 9,410,909 shares of the Companys common
stock at a conversion rate of $0.11 per share, the current market price on that date. In connection with the conversion the Company and Aston agreed to terminate the Aston Note.

On May 19, 2006 we entered into a $540,000 Secured Note Agreement with Double U Master Fund L.P., an unrelated third party investor, that resulted
in net proceeds to us of $447,500 The amounts outstanding under the $540,000 Secured Note Agreement was due and payable on August 31, 2006. The $540,000 Secured Note Agreement was secured by a lien on substantially all of our assets, including
a pledge of our shares in Satellite. In connection with the issuance of the $540,000 Secured Note Agreement, we issued to the investor warrants to purchase an aggregate of 540,000 shares of common stock at an exercise price of $.25 per share. The
warrants are exercisable on or before May 19, 2009.

On July 13, 2006 we entered into a convertible note and warrant financing
transaction (the Secured Note Financing) with a group of unrelated accredited investors in which the Company issued an aggregate of: (i) $3.3 million of Secured Convertible Promissory Notes; (ii) 21,607,465 Series A Warrants
exercisable at $0.13 per share; and (iii) 18,006,221 Series B Warrants exercisable at $0.143 per share. The financing resulted in net proceeds to the Company of $2,947,550 after deducting finders fees and expenses. The amounts outstanding
under the Secured Convertible Promissory Notes bear interest at the rate of ten percent (10%) per annum, mature on July 13, 2009 and are secured by a lien on substantially all of our assets, including a pledge of our shares in Satellite.
The Series A and Series B warrants expire on July 13, 2011. The holders of the Secured Convertible Promissory Notes have the right, at their election, to convert outstanding interest and principal into shares of the Companys common stock
at any time at a conversion price equal to seventy-five percent (75%) of the Companys volume weighted average price as reported on the OTC Bulletin Board for the five (5) day period prior to the conversion. In addition, the Company
has agreed to file a registration statement with the Securities and Exchange Commission to register the resale of the shares of common stock underlying the Secured Convertible Promissory Notes and the Series A and B Warrants. The Company will use of
proceeds from this Secured Note Financing transaction for general working capital purposes.



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In connection with the Secured Note Financing transaction, the Company repaid all amounts due under the
$540,000 Secured Note Agreement with Double U Master Fund, L.P. by repaying $40,000 in cash and converting the remaining $500,000 into a subscription in the July 13thfinancing transaction of convertible notes and warrants. In connection with the transaction, the Company re-priced the 540,000 warrants issued to Double U
Master Fund, L.P. on May 19, 2006 from an exercise price of $0.25 per share to an exercise price of $0.13 per share, the market price on the date of the Secured Note Financing transaction. The exercise date of the 540,000 warrants and the
registration rights remain unchanged.

We anticipate that the proceeds from the Secured Note Financing transaction, together with cash
flows from operations will be sufficient to meet our anticipated expenditures into calendar year 2007. However, if we fail to reach our operating goals, or if we incur unanticipated expenses, we may require additional capital to support our
continued operations. We would plan to raise any additional capital from the sale of debt or equity securities. There are no commitments or arrangements for other offerings in place. Furthermore, the terms and conditions of the Secured Note
Financing transaction place substantial restrictions on our ability to raise additional capital. There is no assurance that we will be able to raise additional funds, and if we are unsuccessful, we will be forced to curtail operations or possibly be
forced to evaluate a sale or liquidation of the Companys assets. Even if we are successful in raising additional funds, there is no assurance regarding the terms of any additional investment. Any future financing may involve substantial
dilution to existing shareholders.

As emphasized in the Report of Independent Registered Public Accounting Firm on our December 31,
2005 financial statements, we have incurred recurring negative cash flows from operations, significant losses, working capital deficits and increasing shareholder deficiencies. Further, we have yet to establish profitable operations. These factors,
among others, raise substantial doubt about our ability to continue as a going concern.

RISK FACTORS

This Quarterly Report on Form 10-QSB contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject
to risks and uncertainties. Actual results could differ materially because of issues and uncertainties such as those listed below and elsewhere in this report, which, among others, should be considered in evaluating the Companys financial
outlook.

The sale of the shares of our common stock acquired in private placements could cause the price of our common stock to decline.

On July 13, 2006, we completed a transaction in which we issued a total of $3,300,000 principal amount of Secured Convertible
Promissory Notes due July 13, 2009. Under the terms of the Secured Convertible Promissory Notes, they may be converted by the holder into shares of our common stock at any time. The transaction further included warrants to purchase an aggregate
of 39,613,686 shares of our common stock. Under the terms of the transaction, we are required to file a registration statement with the United States Securities and Exchange Commission under which the investors may resell to the public common stock
acquired upon the conversion of the notes, as well as common stock acquired upon the exercise of the warrants.

The selling stockholders
under the registration statement may sell none, some or all of the shares of common stock acquired from us, as well as common stock acquired upon the exercise of the warrants held by them. We have no way of knowing whether the selling stockholders
will sell the shares covered by the registration statement. Depending upon market liquidity at the time, a sale of shares covered by the registration statement at any given time could cause the trading price of our common stock to decline. The sale
of a substantial number of shares of our common stock under this prospectus, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might
otherwise wish to effect sales.

We have increased the amount of our secured indebtedness as a result of our recent private placement of Convertible
Secured Promissory Notes.

All of our material assets have been pledged as collateral for the $3,300,000 in Secured Convertible
Promissory Notes that we sold in our recent private placement. In addition to the security interest in our assets, the Secured Convertible Promissory Notes carry substantial covenants that impose significant requirements on us, including, among
others, requirements that:



| |  |  | we pay interest and other charges on the Secured Convertible Promissory Notes;
| | - |  | ------------------------------------------------------------------------------



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| |  |  | we use the proceeds from the sale of the Secured Convertible Promissory Notes only for permitted purposes;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | while the Secured Convertible Promissory Notes are outstanding, if we issue equity or equity linked securities at a price lower than the conversion price then the conversion price
of the Secured Convertible Promissory Notes will be reduced to the same price. If we issue any variable priced equity securities or variable price equity linked securities, then the conversion price of the Secured Convertible Promissory Notes will
be reduced to the lowest issue price applied to those securities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we keep reserved out of our authorized shares of common stock sufficient shares to satisfy our obligation to issue shares on conversion of the Secured Convertible Promissory Notes
and the exercise of the related warrants issued in connection with the sale of the Secured Convertible Promissory Notes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we agreed to file, and did file, a registration statement with the SEC by August 28, 2006, registering the shares of common stock issuable upon the conversion of the Secured
Convertible Promissory Notes and the exercise of the related warrants. If the registration statement is not declared effective by the SEC within a maximum of 150 days from the closing date of the private placement, we are required to pay to the
investors liquidated damages equal to 2.0% of the aggregate principal amount of the notes remaining unconverted and the purchase price of the shares issued upon conversion of the notes and exercise of the warrants owned by such holders and shall pay
to the investors such amount for each subsequent 30-day period; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we shall not, directly or indirectly, (i) redeem, purchase or otherwise acquire any capital stock or set aside any monies for such redemption, purchase or other acquisition or
(ii) issue any floating price security with a floor price below the conversion price.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to comply with these
provisions may be affected by changes in our business condition or results of our operations, or other events beyond our control. The breach of any of these covenants could result in a default under the Secured Convertible Promissory Notes,
permitting the holders of the Secured Convertible Promissory Notes to accelerate their maturity and to sell the assets securing them. Such actions by the holders of the Secured Convertible Promissory Notes could cause us to cease operations or seek
bankruptcy protection.

If we are required for any reason to repay the Secured Convertible Promissory Notes, we would be required to deplete
our working capital, if available, or raise additional funds. Our failure to repay the Secured Convertible Promissory Notes, if required, could result in legal action against us, which could require the sale of substantial assets.

The Secured Convertible Promissory Notes are due and payable on July 13, 2009 unless sooner converted into shares of our
common stock. In addition, the holders would have the right upon any event of default to demand the early repayment of the notes if the default is not cured with the specified grace period. If we are required to repay the promissory notes, we would
be required to use our limited working capital and raise additional funds. If we were unable to repay the Secured Convertible Promissory Notes when required, the noteholders could commence legal action against us and foreclose on all of our assets
to recover the amounts due. Any such action would require us to curtail or cease operations.

To satisfy our capital requirements, we may need to
raise funds in the public or private capital markets, which may not be given on terms favorable to us, or we may not be able to raise funds at all. In the event that we receive funds on undesirable terms, or are unable to raise additional funds, we
may not be able to fund our operations and will not be able to continue as a going concern. The additional funding may have terms which will dilute the value of your investment.

Our ability to raise additional funds in the public or private markets will be adversely affected if the results of our business operations are not
favorable. We may be required seek additional funding through the sale of debt or equity securities in order to sustain our operations. We cannot assure you that any such funding will be available to us, or if available, that it will be available on
terms favorable to us. If adequate funds are not available, we may not be able to continue our operations or implement our planned additional research and development activities. As a result, we may be required to discontinue our operations or
curtail our planned sales and research and development plans, thereby reducing or eliminating the value of our equity. If we are successful in obtaining additional funds, the terms of the financing may have the effect of diluting your interest.



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We have a history of losses, and are unsure if we will become profitable in the future.

We have incurred losses since our inception and cannot assure you that our future operations will be implemented successfully or that we will ever have
profitable operations. We have yet to establish significant customer demand for our solutions and may not for a significant period of time, if ever. If we are unable to establish demand for our solutions, we may be forced to cease operations
entirely. Furthermore, we are experiencing the costs and uncertainties of an emerging business, including additional expenditures, unforeseen costs and difficulties, complications, and delays, all of which must be resolved and/or paid without the
benefit of a predictable revenue stream. Management cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful.

As of September 30, 2006, a limited number of stockholders own approximately 51% of the Companys stock and may act, or prevent certain types of
corporate actions, to the detriment of other stockholders.

The Companys directors, officers and greater than 5% stockholders
own, as of September 30, 2006, approximately 51 million shares the Companys common stock, constituting approximately 51% of our issued and outstanding common stock. Accordingly, these stockholders may, if they act together, exercise
control over all matters requiring stockholder approval, including the election of a majority of the directors and the determination of significant corporate actions. This concentration could also have the effect of delaying or preventing a change
in control that could otherwise be beneficial to our stockholders.

We depend on a limited number of third parties to manufacture and supply certain
components of our solutions.

We rely on a limited number of sole suppliers for certain components of our solutions. We do not have
long-term agreements with these suppliers. If these parties do not perform their obligations, or if they cease to supply the components needed for our solutions, we may be unable to find other suppliers and our business would be seriously harmed. We
cannot be sure that alternative sources for these components will be available when needed, or if available, that these components will be available on commercially reasonable terms. These sole suppliers include Smart Synch, Skytel, and USA Mobility
all of which supply ReFLEX modem boards and/or ReFLEX network data for use in our remote sensor integration and monitoring services.

Although we believe that we have access to sufficient quantities of such components as well as access to the respective networks, we have to be aware that if our agreements with these or other suppliers and manufacturers are terminated or
expire, if we are unable to obtain sufficient quantities of these products or components critical for our solutions, if the quality of these products or components is inadequate, or if the terms for supply of these products or components become
commercially unreasonable, our search for additional or alternate suppliers and manufacturers could result in significant delays, added expense and our inability to maintain or expand our customer base. Any of these events could require us to take
unforeseen actions or devote additional resources to provide our products and services and could harm our ability to compete effectively.

If
wireless communications providers on which we depend for services decide to adopt new wireless technologies, or abandon or do not continue to expand their wireless networks, our operations may be disrupted, we may lose customers and our revenues
could decrease.

Currently, our solutions function on ReFLEX, GPRS and Inmarsat networks. These protocols have various coverage
footprints and are intermixed in order to provide the best service based on each particular subscribers needs. The coverage for ReFLEX is primarily North America; GPRS is the United States, Europe and Canada, while Inmarsat has world wide
coverage. If wireless communications providers abandon the protocols upon which our solutions now function in favor of other types of wireless technology, we may not be able to provide services to customers, or it may be forced to incur considerable
costs in order to adapt its solutions to new protocols. In addition, if cellular carriers do not expand their coverage areas, we will be unable to meet the needs of customers who may wish to use the Companys services outside the current
cellular coverage area.

If one or more of the agreements we have with wireless communications providers is terminated and as a result, we are unable
to offer solutions to customers within a wireless communications providers coverage area, we may be unable to deliver our solutions, may lose customers, and our revenues could decrease.

Our existing agreements with wireless communications providers may, in some cases be terminated immediately upon the occurrence of certain conditions or
with prior written notice. If one or more of our wireless communications providers decides to terminate or not to renew its contract with us, we may incur additional costs relating to obtaining alternate coverage from another wireless communications
provider outside of our primary coverage area, or we may be unable to replace coverage at all, causing a complete loss of services to customers in that coverage area.



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Our success depends upon our ability to develop new solutions and enhance our existing solutions. If we cannot
deliver the features and functionality that customers demand, we will be unable to retain or attract new customers.

If we are
unable to develop new solutions, are unable to enhance and improve our solutions successfully in a timely manner, or fail to position and/or price our solutions to meet market demand, we may not attract new customers, existing customers may not
expand their use of our solutions, and its business and operating results will be adversely affected. If enhancements to existing solutions do not deliver the functionality that our customer base demands, its customers may choose not to renew their
agreements when they reach the end of their initial contract periods, and our business and operating results will be adversely affected. If we cannot effectively deploy, maintain and enhance our solutions, our revenues may decrease, we may not be
able to recover costs, and our competitive position may be harmed.

We depend on GPS technology owned and controlled by others. If we do not have
continued access to GPS technology or satellites, we will be unable to deliver a majority of our solutions and revenues will decrease.

A majority of our solutions rely on signals from GPS satellites built and maintained by the United States Department of Defense. GPS satellites and their ground support systems are subject to electronic and mechanical failures and sabotage.
If one or more satellites malfunction, there could be a substantial delay before they are repaired or replaced, if at all, our products and services may cease to function, and customer satisfaction would suffer.

In addition, the United States government could decide to discontinue operation and maintenance of GPS satellites or to charge for the use of GPS.
Furthermore, because of ever-increasing commercial applications of GPS and international political unrest, United States government agencies may become increasingly involved in the administration or the regulation of the use of GPS signals in the
future. If factors such as the foregoing affect GPS, for example by affecting the availability, quality, accuracy or pricing of GPS technology, our business will suffer.

A disruption of our services or of our software applications due to accidental or intentional security breaches may harm our reputation, cause a loss of revenues and increase corporate expenses.

Unauthorized access, computer viruses and other accidental or intentional actions could disrupt information systems or
communications networks or could adversely impact the functionality and security of our software products. We expect to incur significant costs to protect against the threat of security breaches and to alleviate problems caused by any breaches.
Currently, the wireless transmission of customers proprietary information is not protected by encryption technology. If a third party were to misappropriate our customers proprietary information or adversely impact the operations of our
customers, we could be subject to claims, litigation or other potential liabilities that could seriously harm our revenues and result in the loss of customers.

System or network failures could reduce corporate sales, increase costs or result in liability claims.

Any
disruption to our services, information systems or communications networks or those of third parties could result in the inability of our customers to receive our services for an indeterminate period of time. Our hosted solutions and related
operations depend upon our ability to maintain and protect our computer systems at data centers located in San Diego, California, and our network operations center in San Diego, California. Our services may not function properly and we may not be
able to adequately support and maintain our software products if our systems fail, if there is an interruption in the supply of power, or if there is an earthquake, fire, flood or other natural disaster, or an act of war or terrorism. Within each of
our data centers, we have fully redundant systems; however, in the event of a system or network failure, the process of shifting access to customer data from one data center to the other would be performed manually, and could result in a further
disruption of our services and our ability to adequately support and maintain software products. Any disruption to our services could cause the loss of customers or revenue, or face litigation, customer service or repair work that would involve
substantial costs and could distract management from operating the core business.

Our success depends on our ability to maintain and expand our
direct and indirect sales channels.

To increase our market awareness, customer base and revenues, management needs to expand direct
and indirect sales operations. There is strong competition for qualified sales personnel, and we may not be able to attract or retain sufficient new sales personnel to expand our operations. New sales personnel require training, and it takes



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time for them to achieve full productivity, if at all. In addition, we believe that our success is dependent on the expansion of indirect distribution
channels, including relationships with wireless carriers, independent sales agents and resellers. These sales channel alliances require training in selling solutions, and it will take time for these alliances to achieve productivity, if at all. We
may not be able to establish relationships with additional distributors on a timely basis, or at all.

Defects or errors in our solutions could
result in the cancellation of or delays in the implementation of our solutions, which would damage our reputation and harm our financial condition.

We must develop solutions quickly to keep pace with the rapidly changing remote sensor integration and monitoring market. Solutions that address this market are likely to contain undetected errors or defects,
especially when first introduced or when new versions are introduced. We may be forced to delay commercial releases of new solutions or updated versions of existing solutions until such errors or defects are corrected, and in some cases, we may need
to implement enhancements to correct errors that were not detected until after deployment of its solutions. Even after testing and release, our solutions may not be free from errors or defects, which could result in the cancellation or disruption of
services or dissatisfaction of customers. In some cases, customers may terminate their agreements with us, without penalty, if the solution provided does not meet the specifications agreed upon by the parties. Such contract terminations or customer
dissatisfaction would damage our reputation and result in lost revenues, diverted development resources, and increased support and warranty costs.

We face competition from internal development teams of potential customers and from existing and potential competitors, and if we fail to compete effectively, our ability to acquire new customers could decrease, our revenues could
decline and our business could suffer.

The market for remote sensor integration and monitoring is competitive and is expected to
become even more competitive in the future. If we do not compete effectively, competition could harm our business and limit our ability to acquire new customers and grow revenues, which in turn could result in a loss of market share and decline in
revenues. We believe that our solutions face competition from a number of business productivity solutions, including:



| |  |  | solutions developed internally by our prospective customers information technology staff, particularly by large customer prospects;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | discrete means of communication with mobile workers, such as pagers, two-way radios, handheld devices and cellular telephones;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | solutions designed to help companies schedule and route their mobile workers; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | solutions offered by smaller market entrants, many of which are privately held and operate on a regional basis.
| | - |  | ---------------------------------------------------------------------------------------------------------------

In addition, we believe that our solutions face competition from manufacturing companies that seek to enter the mobile resource management market, such as Trimble
Navigation and @Road.

We may also face potential competition from our current and potential alliances, such as wireless carriers, that may
develop their own solutions, develop solutions with captive and other suppliers or support the marketing of solutions of other competitors.

We also face numerous challenges associated with overcoming the following competitive factors:



| |  |  | Size and resources. Many of our current and potential competitors have access to substantially greater financial, marketing, distribution, engineering and manufacturing resources
than we do, which may enable them to react more effectively to new market opportunities and customer requirements. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer more attractive terms than we can.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Name recognition. Many of our current and potential competitors have greater name recognition and market presence than we do, which may allow them to more effectively market and
sell solutions to our current and potential customers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limits of product and service offerings. Although we offer a broad range of mobile resource management solutions, a customer prospect may require functionality that we do not offer,
which may enable current and potential competitors to exploit the areas in which we do not develop solutions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Customer relationships. Many of our current and potential competitors have pre-existing relationships with our large customer prospects, which may allow them to more effectively
market and sell competitive remote sensor integration and monitoring solutions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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As we seek to serve larger customers, we face competition from businesses with greater financial resources and may
be unable to compete effectively with these businesses.

The existing market is competitive. Competition is particularly vigorous
for larger customers, which is a customer segment we have worked to serve. We expect competition to increase further as companies develop new products and/or modify their existing products to compete directly with our products. In addition,
competitors may reduce prices to customers and seek to obtain customers through cost-cutting and other measures. To the extent these companies compete effectively with us, our business could be adversely affected by extended sales cycles, fewer
sales, and lower prices, revenue and margins.

Claims that we infringe third-party proprietary rights could result in significant expenses or
restrictions on our ability to provide our solutions.

Third parties may claim that our current or future solutions infringe their
proprietary rights or assert other claims against us. As the number of entrants into our market increases, the possibility of an intellectual property or other claim against us grows. Any intellectual property or other claim, with or without merit,
would be time-consuming and expensive to litigate or settle and could divert managements attention from our core business. As a result of such a dispute, we may have to pay damages, incur substantial legal fees, develop costly non-infringing
technology, if possible, or enter into license agreements, which may not be available on terms acceptable to us, if at all. Any of these results would increase our expenses and could decrease the functionality of our solutions, which would make our
solutions less attractive to current or potential customers. We have agreed in some of our agreements, and may agree in the future, to indemnify other parties for any expenses or liabilities resulting from claimed infringements of the proprietary
rights of third parties.

If our customers do not have access to sufficient capacity on reliable wireless networks, we may be unable to deliver
services, our customers satisfaction could decline and revenues could decrease.

Part of the Companys ability to grow
and obtain profitability depends on the ability of wireless carriers to provide sufficient network capacity, reliability and security to customers. Even where wireless carriers provide coverage to entire metropolitan areas, there are occasional
lapses in coverage, for example due to tunnels blocking the transmission of data to and from wireless modems used with our solutions. These effects could make our services less reliable and less useful, and customer satisfaction could suffer.

Under the terms of our customer contracts for our monitoring solutions, once the contract period expires, a customer may terminate our services with
little or no notice.

Our customer contracts for monitoring solutions typically provide for a contract period of one to five years.
Under the terms of a typical contract, a customer will often be subject to a termination fee if it chooses to terminate the contract before the contract period expires. Once the contract period has expired, and unless a customer has executed a new
contract, the terms of the contract will remain in force on a month-to-month basis, allowing the customer to terminate the contract by giving very short notice and without incurring any termination fee. The termination of a significant number of
customer contracts or customer contracts providing a material portion of our revenues could cause its business to suffer and adversely affect its financial results.

The production or reporting of inaccurate information could cause the loss of customers and expose us to legal liability.

The accurate production and reporting of information is critical to our customers businesses. If we fail to accurately produce and report information, we could lose customers, our reputation and ability to
attract new customers could be harmed, and we could be exposed to legal liability. We may not have insurance adequate to cover losses we may incur as a result of these inaccuracies.

We depend on recruiting and retaining qualified personnel, and our inability to do so may result in a loss in sales, impair our ability to effectively manage core operations or impair our ability to develop and
support corporate solutions.

Because of the technical nature of our solutions and the market in which we compete, our success
depends on the continued services of our current executive officers and our ability to attract and retain qualified personnel with expertise in wireless communications, GPS technologies, hosted software applications, transaction processing and the
Internet. Competitors and others have recruited our employees in the past and may attempt to do so in the future. In addition, new employees generally require substantial training, which requires significant resources and management attention. Even
if we invest significant resources to recruit, train and retain qualified personnel, there can be no assurances that we will be successful in our efforts.



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From time to time, we may be subject to litigation that could result in significant costs.

From time to time, we may be subject to litigation in the ordinary course of business relating to any number or type of claims, including claims for
damages related to errors and malfunctions of products and services or their deployment. A securities, product liability, breach of contract, or other claim could seriously harm our business because of the costs of defending the lawsuit, diversion
of employees time and attention, and potential damage to our reputation. Some of our agreements with customers, suppliers and other third parties contain provisions designed to limit exposure to potential claims. Limitation of liability
provisions contained in our agreements may not be enforceable under the laws of some jurisdictions. As a result, we could be required to pay substantial amounts of damages in settlement or upon the determination of any of these types of claims.
Although we carry general liability and directors and officers insurance, corporate insurance may not cover potential claims or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liabilities
that may be imposed.

Government regulations and standards could subject us to increased regulation, increase our costs of operations or reduce our
opportunities to earn revenue.

In addition to regulations applicable to businesses in general, we may also be subject to direct
regulation by United States governmental agencies, including the Federal Communications Commission, Department of Defense, Department of Commerce or the State Department. These regulations may impose licensing requirements, privacy safeguards
relating to certain subscriber information, or safety standards, for example with respect to human exposure to electromagnetic radiation and signal leakage. A number of legislative and regulatory proposals under consideration by federal, state,
provincial, local and foreign governmental organizations may lead to laws or regulations concerning various aspects of the Internet, wireless communications and GPS technology, including on-line content, user privacy, taxation, access charges and
liability for third-party activities. Additionally, it is uncertain how existing laws governing issues such as taxation on the use of wireless networks, intellectual property, libel, user privacy and property ownership will be applied to our
solutions. The adoption of new laws or the application of existing laws may expose us to significant liabilities and additional operational requirements, which could decrease the demand for its solutions and increase its cost of doing business.
Wireless communications providers who supply us with airtime are subject to regulation by the Federal Communications Commission, and regulations that affect them could also increase our costs or limit its ability to provide solutions.

Geopolitical, economic and military conditions, including terrorist attacks and other acts of war, may materially and adversely affect the markets on which our
common stock trades, the markets in which we operate, our operations and our profitability.

Terrorist attacks and other acts of
war, and any response to them, may lead to armed hostilities and such developments would likely cause instability in financial markets. Armed hostilities and terrorism may directly impact our facilities, personnel and operations which are located in
the United States as well as those of our customers and suppliers. Furthermore, severe terrorist attacks or acts of war may result in temporary halts of commercial activity in the affected regions, and may result in reduced demand for solutions.
These developments could have a material adverse affect on our business and the trading price of our common stock.

Our stock price is volatile,
which may cause you to lose money and could lead to costly litigation against us and management that could divert corporate resources.

From time to time, stock markets experience dramatic price and volume fluctuations, particularly for shares of technology companies. These fluctuations can be unrelated to the operating performance of these companies. Broad market
fluctuations may reduce the market price of our common stock and cause you to lose some or all of your investment. These fluctuations may be exaggerated if the trading volume of our common stock is low. In addition, due to the technology-intensive
nature and growth rate of our business and the remote sensor integration and monitoring market, the market price of our common stock may rise and fall in response to:



| |  |  | quarterly variations in operating results;
| | - |  | ------------------------------------------



| |  |  | failure to achieve operating results anticipated by securities analysts and investors;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | changes in estimates of the Companys financial performance or changes in recommendations by securities analysts;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | announcements of technological or competitive developments;
| | - |  | -----------------------------------------------------------



| |  |  | the gain or loss of a significant customer or order;
| | - |  | ----------------------------------------------------



| |  |  | disposition of shares of the Companys common stock held by large investors; and
| | - |  | --------------------------------------------------------------------------------



| |  |  | acquisitions or strategic alliances by us or the Companys competitors.
| | - |  | -----------------------------------------------------------------------



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When the market price of a companys stock drops significantly, stockholders often institute
securities class action lawsuits against that company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of the Companys management and other corporate resources from general business
operations.

Our quarterly operating results are subject to fluctuations, and our stock price may decline if we do not meet the expectations of
investors and analysts.

Our quarterly revenues and operating results are difficult to predict and may fluctuate significantly from
quarter to quarter due to a number of factors, many of which are outside its control. These factors include, but are not limited to:



| |  |  | changes in the market for remote sensor integration and monitoring solutions;
| | - |  | -----------------------------------------------------------------------------



| |  |  | delays in market acceptance or implementation of the Companys solutions by customers;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | changes in length of sales cycles of, or demand by, the Companys customers for existing and additional solutions;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | changes in the productivity of the Companys distribution channels;
| | - |  | -------------------------------------------------------------------



| |  |  | introduction of new solutions by us or the Companys competitors;
| | - |  | -----------------------------------------------------------------



| |  |  | changes in the Companys pricing policies or those of its competitors or suppliers;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | changes in the Companys mix of sources of revenues;
| | - |  | ----------------------------------------------------



| |  |  | general economic and political conditions;
| | - |  | ------------------------------------------



| |  |  | wireless networks, positioning systems and Internet infrastructure owned and controlled by others; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | any need to migrate to new wireless networks, which could cause the Companys solutions to be incompatible with new wireless networks or become out of date.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys expense levels are based, in part, on its expectation of future revenues. Additionally, a substantial
portion of its expenses are relatively fixed. As a result, any shortfall in revenues relative to the Companys expectations could cause significant changes in its operating results from quarter to quarter. Because of the size of our operations,
the presence or absence of a single large order or expense can have a significant result on quarterly results. As a result, you should not rely on the Companys quarterly revenues and operating results to predict the Companys future
performance. Its operating results have been, and in some future quarters operating results may be, below the expectations of public market analysts and investors and, as a result, the price of the Companys common stock may fall.



|ITEM 3. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a) Disclosure Controls
and Procedures. Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed in the reports that a company files or submits under the Exchange Act is accumulated and communicated to the companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.

We maintain disclosure controls and procedures designed to ensure that material information
related to our company is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Under
the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2006, the design and operation of such disclosure controls and procedures were effective.

(b) Changes In Internal Controls Over Financial Reporting.During the fiscal quarter ended September 30, 2006, the Company retained a new
Chief Financial Officer, Mr. Aidan Shields. With the exception of Mr. Shields appointment, no changes were made in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during
our most recent fiscal quarter that has materially affected, or is likely to materially affect, our internal control over financial reporting.



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(c) Limitations On Disclosure Controls And Procedures. Our management, including our Chief
Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated
goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.

PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

In the course of our business,
we have been, and may continue to be, involved in various claims seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of our management, the ultimate
liability for any legal claims currently pending or threatened against us will not have a material adverse effect on our financial position, results of operations or cash flows.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

On July 13, 2006, we entered into (and simultaneously completed the transaction contemplated thereby) a Subscription Agreement with twenty subscribers pursuant to which we issued an aggregate of (i) $3,300,000 aggregate principal
amount of secured convertible promissory notes (ii) 18,006,221 Series A Warrants to purchase common stock at an exercise price of $0.13 per share; (iii) 18,006,221 Series B Warrants to purchase shares of common stock at an exercise price
of $0.143 per share (the Secured Note Financing). We engaged Pentium Management LTD (Pentium) as the placement agents in connection with the Secured Note Financing. Under our agreement with Pentium we paid them an aggregate
cash fee of $330,000 in connection with closing of the transaction (10% of the aggregate principal amount of the notes). In addition, we issued to Pentium Series A Warrants to purchase up to 3,601,244 shares of our common stock at $0.13 per share.
Under the terms of agreement with Pentium, Pentium will also be entitled to receive an aggregate of 10% of cash proceeds received by the Company upon exercise of any of the warrants issued to the investors in the Secured Note Financing. In each
case, the secured convertible promissory notes and warrants were offered and sold to a party that the Company or its authorized agents believed was an accredited investor, as that term is defined in Rule 501 of Regulation D in reliance
upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the Securities Act) in a transaction not involving any public offering. The recipients represented to the Company that: (i) they are an
accredited investor; (ii) the securities were acquired by the party for their own account and without any view to the distribution, assignment or resale to others other than pursuant to a registered offering; (iii) the party
understood that the securities issued to them had not been registered under the Securities Act or any state securities laws; and (iv) the party acknowledged that they may not transfer the securities unless the securities are registered under
Federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such laws is available. We arranged for a legend to be placed on certificates representing such securities, making them
subject to stop transfer restrictions. We did not engage in any form of general solicitation or general advertising in connection with these issuances.

On July 9, 2006 we entered into an Note Conversion and Lock Up Agreement with The Aston Organization, Ltd. (Aston) pursuant to which Aston agreed to convert $1,035,200 outstanding under a Convertible
Promissory Note into 9,410,909 shares of our common stock. Aston is owned and controlled by Zirk Engelbrecht and Steven Hallock, two of our directors, and is an accredited investor as such term is defined in Rule 501 of Regulation D promulgated
under the Securities Act. The transaction was exempt from registration in reliance on the exemption



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from the registration provided by Section 4(2) of the Securities Act for transactions not involving any public offering. We arranged for a legend to be
placed on certificates representing such securities, making them subject to stop transfer restrictions. We did not engage in any form of general solicitation or general advertising in connection with the issuance.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------

Each exhibit
identified below is filed as a part of this report.



|           |  |                                                                                                                                                        
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                            
|           | 
|4.1        |  | Form of Class A Common Stock Purchase Warrant for July 2006 Convertible Note and Warrant financing. (1)                                                
|           | 
|4.2        |  | Form of Class B Common Stock Purchase Warrant for July 2006 Convertible Note and Warrant financing. (1)                                                
|           | 
|4.3        |  | Form of Secured Convertible Promissory Note for July 2006 Convertible Note and Warrant financing. (1)                                                  
|           | 
|4.4        |  | Form of Subscription Agreement for July 2006 Convertible Note and Warrant financing. (1)                                                               
|           | 
|4.5        |  | Form of Security Agreement for July 2006 Convertible Note and Warrant financing. (1)                                                                   
|           | 
|4.6        |  | Form of Guaranty for July 2006 Convertible Note and Warrant financing. (1)                                                                             
|           | 
|4.7        |  | Form of Escrow Funds for July 2006 Convertible Note and Warrant financing. (1)                                                                         
|           | 
|4.8        |  | Form of Collateral Agreement for July 2006 Convertible Note and Warrant financing. (1)                                                                 
|           | 
|10.1       |  | Note Conversion and Lock Up Agreement dated as of July 9, 2006 between the Company and The Aston Organization, Ltd. (2)                                
|           | 
|10.2       |  | Employment Agreement dated as of July 14, 2006 between the Company and Aidan Shields regarding Mr. Shields appointment as Chief Financial Officer. (1)
|           | 
|31.1       |  | Certification of Periodic Report by the Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                            
|           | 
|31.2       |  | Certification of Periodic Report by the Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                            
|           | 
|32.1       |  | Certification of Chief Executive Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        
|           | 
|32.2       |  | Certification of Chief Financial Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        



|(1) | Previously filed with the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(2) | Previously filed with the Companys Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on August 11, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

During the three month period ended September 30, 2006, we filed the following current reports on Form 8-K with the Securities and Exchange
Commission:

On July 17, 2006 we filed a current report on Form 8-K relating to the Convertible Note and Warrant financing
transaction.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



SATELLITE SECURITY CORPORATIONBy:

/s/ Mr. John L. PhillipsMr. John L. PhillipsChief Executive Officer




By:

/s/ Mr. Aidan ShieldsMr. Aidan ShieldsChief Financial Officer


Dated: November 16, 2006



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